Correlation Between Monster Beverage and STEEL DYNAMICS

Can any of the company-specific risk be diversified away by investing in both Monster Beverage and STEEL DYNAMICS at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Monster Beverage and STEEL DYNAMICS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Monster Beverage Corp and STEEL DYNAMICS, you can compare the effects of market volatilities on Monster Beverage and STEEL DYNAMICS and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Monster Beverage with a short position of STEEL DYNAMICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and STEEL DYNAMICS.

Diversification Opportunities for Monster Beverage and STEEL DYNAMICS

0.43

Correlation Coefficient

Monster Beverage  STEEL DYNAMICS

Very weak diversification

The 3 months correlation between Monster and STEEL is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and STEEL DYNAMICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STEEL DYNAMICS and Monster Beverage is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Monster Beverage Corp are associated (or correlated) with STEEL DYNAMICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STEEL DYNAMICS has no effect on the direction of Monster Beverage i.e., Monster Beverage and STEEL DYNAMICS go up and down completely randomly.

Pair Corralation between Monster Beverage and STEEL DYNAMICS

Assuming the 90 days trading horizon Monster Beverage Corp is expected to under-perform the STEEL DYNAMICS. But the stock apears to be less risky and, when comparing its historical volatility, Monster Beverage Corp is 1.86 times less risky than STEEL DYNAMICS. The stock trades about -0.02 of its potential returns per unit of risk. The STEEL DYNAMICS is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  10,169  in STEEL DYNAMICS on April 20, 2025 and sell it today you would earn a total of  1,127  from holding STEEL DYNAMICS or generate 11.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Monster Beverage Corp  vs.  STEEL DYNAMICS

Monster Beverage Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Monster Beverage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Monster Beverage is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

STEEL DYNAMICS

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in STEEL DYNAMICS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, STEEL DYNAMICS may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Monster Beverage and STEEL DYNAMICS

The main advantage of trading using opposite Monster Beverage and STEEL DYNAMICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, STEEL DYNAMICS can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in STEEL DYNAMICS will offset losses from the drop in STEEL DYNAMICS's long position.

The idea behind Monster Beverage Corp and STEEL DYNAMICS pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.